Key-takeaways from the AML/CFT virtual conference held on 25 January 2021 for Specialised PFS
Sub-sector risk assessment on trust and company service provider activities (“SSRA TCSP”)
- Published on 20 July 2020 and available on CSSF’s website ML_TF_risk_analysis_TCSP.pdf (cssf.lu)
- It is a sectorial analysis which complements the updated National Risk Assessment (“NRA”).
- ML/FT threats and vulnerabilities are analysed together with mitigation factors.
- Both NRA and SSRA concluded that the inherent ML/FT risks are high and the residual risks, after implementation of mitigation factors, medium-high.
- Mitigation measures are performed at the level of the Specialised PFS (e.g. customer due diligence and ongoing monitoring, procedures and trainings, etc.) and at the level of the CSSF (e.g. promotion of understanding of ML/TF risks, markets entry controls, ongoing supervision, etc.).
- The aim of the SSRA is to help Specialised PFS to have a better understanding of their ML/FT risks.
- Specialised PFS are expected to take the findings of the SSRA (in addition to the ones of the updated NRA and the Supra National Risk Assessment) into account in their AML/CFT frameworks.
- The SSRA only covers TCSP activities carried out by Specialised PFS. However, other professionals might also find the SSRA TCSP helpful to strengthen their AML/CFT framework.
2020 AML/CFT Survey
- The answers in the annual AML/CFT survey must be complete, transparent and correct.
- The annual AML/CFT survey is an important tool to evaluate the risk profile of a Specialised PFS
- Important addition regarding the names of the responsable du contrôle du respect des obligations professionnelles (“RC”) and the responsable du respect des obligations professionnelles (“RR”).
RC and RR concepts
- RC is the person who shall implement AML/CFT, normally 2nd line of defense for example the compliance officer (but not necessarily).
- RR is a member of the authorised management responsible for AML/CFT (authorised management = directors authorised by the CSSF and in charge of the day-to-day business).
- There should be 1 RC and 1 RR.
- RC and RR cannot be the same person.
- RC and RR functions cannot be delegated.
- RC and RR must have professional experience, knowledge of the Luxembourg legal and regulatory framework relating to AML/CFT, the hierarchy and powers within the Specialised PFS, as well as the availability necessary to the effective and autonomous exercise of their functions.
- The names of the RC and RR must be notified to the CSSF. CSSF will analyse the notifications.
- According to the updated National Risk Assessment, tax crimes are one of the 4 major high-risk ML/TF threats.
- Specialised PFS are vulnerable to tax crimes mainly due to the international nature of their activities.
- Taking into due consideration tax risks is part of the initial and on-going due diligence process.
- Tax “fraud” indicia are mentioned in the AML/CFT Law dated 12 November 2004 as amended, the CSSF circular 17/650 as amended and in the DAC 6 hallmarks.
- Specialised PFS are expected to have appropriate knowledge to detect predicate tax offence indicators.
- Specialised PFS must ensure that staff is trained properly in order to be able to detect tax fraud indicia.
- Any suspicion of money laundering related to a predicate tax offence must be reported to the FIU without delay.
Insight on AML/CFT on-site inspections
- During COVID-19 the CSSF continues to perform “remote” onsite inspections.
- CSSF applies a risk-based approach but also Specialised PFS with a low AML/CFT risk are subject to onsite inspections.
- Full scope inspections take approximately 3 weeks onsite while partial and thematic scope last generally less long.
- Specialised PFS should be prepared at all times for an AML/CFT onsite inspection.
- Specialised PFS should check the frequent breaches in the CSSF’s annual report.
- Most common breaches:
- Incorrect name screening frequency and lack of formalisation of analyses of hits.
- Insufficient documentation on initial and ongoing due diligence.
- Late filing of SARs/STRs to FIU. Specialised PFS are expected to be registered at GO AML in order to be able to file SARs/STRs without delay (registration should be done on https://justice.public.lu/fr/organisation-justice/crf.html).
- Due diligence measures not adapted to identify risks.
- Weaknesses identified by the CSSF must be addressed promptly by the Specialised PFS.